I will of course be using my accountant to submit my SA tax return as always however I just wanted to get some information ahead of time (he usually does this work for me in the December preceeding the January deadline).
I have developed some software over a period of about 5 years personally (in my spare time) and away from any business/employment/my own Ltd companies etc - completely privately. I sold this software to my Ltd company (the company has other shareholders/investors as well as myself - I own 76.9%). The value of the transaction was ~£2m.
Question: for my SA tax calculation - what am I looking at roughly for liability? Presume its CGT? I have received no other income during the year whatsoever.
Thank you.
Replies (18)
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Do not think CGT.
It would have been a good idea to chat with the accountant last January, as clearly the development would have been on its way.
Did you sell it before December 2019?
Already happened before you had prior tax return done.
All tax planning opportunities lost
Do not enjoy talking to your accountant?
Talk to him now.
You have had 14 months since sale to talk to him.
He may suggest a couple of steps backward.
Tax on income tax rules exceeds £800,000. Any cash in the company yet?
If all investors money in then say £460,000
Strange the solicitors you used did not raise any tax issues or valuation concerns at the point of executing the transaction. Did the company issue new shares to the investors, was your ownership percentage diluted, did you sell some of your existing shares etc, surely there was some professional input at some point, for one thing someone surely registered the IP itself as who in their right mind would stump up £2m to buy something which does not have cast iron certainty it can be exploited in future?
Did you account for VAT on this? Sold software to my companyI will of course be using my accountant to submit my SA tax return as always however I just wanted to get some information ahead of time (he usually does this work for me in the December preceeding the January deadline).
I have developed some software over a period of about 5 years personally (in my spare time) and away from any business/employment/my own Ltd companies etc - completely privately. I sold this software to my Ltd company (the company has other shareholders/investors as well as myself - I own 76.9%). The value of the transaction was ~£2m.
Question: for my SA tax calculation - what am I looking at roughly for liability? Presume its CGT? I have received no other income during the year whatsoever.
Thank you.
This has to be a wind-up. Noone but noone but noone would seriously be so stupid as to do this without taking advice.
If it's for real, tell your accountant and do so now. S/he won't want to be dealing with it in January.
Could be lots of stupid people about, e.g. people who invest & acquire 23.1% of a company then allow it to transact with its founder for £2m, possibly from what they invested.Noone but noone but noone would seriously be so stupid as to do this without taking advice.
I thought that too, but alongside the odd notion that such a founder wouldn't have the sense to come on Aweb. (It's Thursday, what do you want from me, logic?!)
The (tax) question at the heart of that thought is: what was the market value of the software?
£342,501.21
I will email my working to you later, just dashing off to the dentist.
I have not worked out the VAT, sure you can do that calculation yourself.
With big numbers like that tell your accountant you want to discuss it with them asap and December is too late.
Hope the above helps with the commercial logic.
I wasn't questioning the commercial logic. Just the intelligence (or otherwise) of not taking advice. Which, honestly, sounds even more stupid given your explanations. Still, the identifiable damage at this stage is probably only about a million in tax, which isn't much in the scheme of things. (There's not enough to say - or, rather, I couldn't be bothered to read enough to see - whether the actual tax loss might be significantly higher.)
Exasperated
All this done and no accountant involved or even aware
Reads now like a wonderful dream
Trouble is I have a client in same industry, everything on hold and airline industry on its knees, committing to nothing at all. My man is reservations software
He has released most of his staff. Others all on Flexi furlough
£2m in this context is what we accountants call - altogether now - material!
Why do people not get that "tax planning" involves doing something before the action that is then decided upon? Ye gods.